Monday, September 5, 2011

European Union's oil embargo on Syria

After weeks of review, the European Union has decided to impose an oil embargo on Syria. The EU said it would impose a ban on the import of Syrian oil to the 27-nation bloc.EU Officials said the measure would affect Britain and France, the leading clients of Syria’s energy sector.

“The prohibition concerns purchase, import and transport of oil and other petroleum products from Syria,” the EU said on Sept. 2. “No financial or insurance services may be provided for such transactions.”

The EU decision did not prevent British or other European contractors from continuing energy projects for the regime of Syrian President Bashar al-Assad.

Britain has helped develop Syria’s energy sector. Britain’s Gulfsands Petroleum has been searching for oil and natural gas in several areas of the Arab country amid the Sunni revolt.

The EU also said it would maintain its arms embargo on President al-Assad`s regime. Several European states, particularly Britain and France, were reported to have sold light weapons and technology to Syria’s military and security forces.

“The arms embargo imposed on Syria on May 9 continues to remain in place,” the EU said.

On the other hand, Oil-hungry China and India could undermine efforts by the European Union to punish Syria for its deadly response to activists trying to overthrow the government.

The EU oil embargo on Syria is shutting down the vast majority of that country’s export market. The taps won’t be turned off, however, until the middle of November. Even if this market closes, Syria will have other options that could leave the repressive government relatively unscathed.

China, as well as India, could absorb the roughly 150,000 barrels of oil a day that Syria currently directs toward the EU. Oil exports make up about 25 per cent of Syria’s revenue, and at today’s oil prices, the shipments are worth about $4-billion a year, according to Ayham Kamel, an expert on the Middle East at Eurasia Group, a global research firm.

“Financially, it won’t have a big impact [on Syria],” he said of the sanctions. “They can sell the oil elsewhere.”

China and India are two countries likely to fill the void, Mr. Kamel said. Roughly three-quarters of Syria’s oil exports are heavy, limiting the number of refineries that can process it into useable products such as gasoline and jet fuel.

However, China and India in particular, have been building facilities that can deal with thicker crude as they desperately try to meet growing demand.

The EU sanctions, which were encouraged by the United States, a country that does not import Syrian oil, come after more than five months of violence in Syria.

The United Nations estimates that about 2,200 people have been killed since March. The regime is in no imminent danger of collapse, but the protesters are determined, leading to concerns violence could escalate.

On Sunday, a state-run newspaper in Syria criticized Europe’s move.

“Instead of playing an effective and positive political role, Europe shows its pent-up desire to evoke the colonial past,” Al-Thawra newspaper said.

Emadeddin al Rashid, of Syria’s opposition National Salvation Congress, believes the EU’s ban will hit Syria’s ruling family, but that it does not mean al-Assad will lose control over the country.

“It will no doubt hurt, and is direct pressure on the regime, as it affects their personal finances.” he said, according to Reuters.

“It will however be an excuse to supply Syria with Iraqi and Iranian oil as a form of economic aid to prop up the regime. Oil sanctions are among several issues that put pressure on the regime . . . but alone it will not tip the balance against the regime as Syria has had long experience in dealing with sanctions.”

Syria has been producing about 380,000 barrels of crude oil per day. Most of the Syrian exports of 150,000 barrels per day were destined to EU states, including France, Germany, Italy and the Netherlands.

While Syria, which produces about 400,000 barrels of oil a day, may have to accept a lower price for the exported crude, these prospective buyers could put a serious dent in the effectiveness of the EU’s ban.

In August, the United States imposed an oil embargo on Damascus. The U.S. move went beyond that of the EU and also banned investments in Syria.

Without revenue from exporting crude to the EU’s 27 states, Syria will likely burn through foreign reserves far more quickly. It had $17-billion in reserves at the start of the uprising. Still, some analysts believe Syria is getting financial assistance from Iran, which would cushion the EU blow.